What's Really Behind Europe's Decline? It's The Birth Rates, Stupid

Joel Kotkin
, ContributorI cover demographic, social and economic trends around the world.Opinions expressed by Forbes Contributors are their own.

(Image credit: AFP/Getty Images via @daylife)

The labor demonstrators, now an almost-daily occurrence in Madrid and other economically-devastated southern European cities lambast austerity and budget cuts as the primary cause for their current national crisis. But longer-term, the biggest threat to the European Union has less to do with government policy than what is--or is not--happening in the bedroom.

In particular, southern Europe’s economic disaster is both reflected -- and is largely caused by -- a demographic decline that, if not soon reversed, all but guarantees the continent’s continued slide. For decades, the wealthier countries of the northern countries -- notably Germany -- have offset very low fertility rates and declining domestic demand by attracting migrants from other countries, notably from eastern and southern Europe, and building highly productive export oriented economies.

In contrast, the so-called Club Med Countries-- Greece, Italy, Portugal and Spain--have not developed strong economies to compensate for their fading demographics outside pockets of relative prosperity such as Milan. Spain was once one of Europe’s star performers, buoyed largely by real estate speculation and growing integration with the rest of the EU. Six years ago the country was building upwards of 50% as many houses as the US while having 85% less population. Roughly six million immigrants came to work in the boom, even as roughly seven to eight percent of Spaniards preferred to remain unemployment.

When the real estate bubble broke, there was only limited productive industry to step into the breach. In Spain, private sector credit has dropped for a remarkable eighteen straight months while industrial production has fallen precipitously--7.5 percent in March alone. Spain’s unemployment rate has scaled over 23%, more than twice the EU average. Unemployment among those under 25 in both Spain and Greece now reaches over fifty percent.

After decades of expansion, even fashionable Madrid is littered with store vacancies and ubiquitous graffiti; many young people can be seen on the street in the middle of the week, either doing nothing or trying to pick up an odd Euro or two performing for tourists.

'A Change In Values'

Economists tend to explain this decline in terms of budget deficits and failed competitiveness, but some Spaniards believe the main cause lies elsewhere. Alejandro MacarrónLarumbe, a Madrid-based management consultant and author of the 2011 book, Elsuicidiodemográfico de España, says today’s decline is “almost all about a change in values.”

A generation ago Spain was just coming out of its Francoist era, a strongly Catholic country with among the highest birth rates in Europe, with the average woman producing almost four children in 1960 and nearly three as late as 1975-1976. There was, he notes, “no divorce, no contraception allowed.” By the 1980s many things changed much for the better better, as young Spaniards became educated, economic opportunities opened for women expanded and political liberty became entrenched.

Yet modernization exacted its social cost. The institution of the family, once dominant in Spain, lost its primacy. “Priorities for most young and middle-aged women (and men) are career, building wealth, buying a house, having fun, travelling, not incurring in the burden of many children,” observes Macarron. Many, like their northern European counterparts, dismissed marriage altogether; although the population is higher than it was in 1975, the number of marriages has declined from 270,000 to 170,000 annually.